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LED Demand to Grow in 2014 and Beyond

With prices dropping, LED demand will soar, driven by growth in segments such as office space and the residential sector, says Robbie Paul, director, lighting sales, Digi-Key Corp.

By Joe Nowlan

01/31/2014

LED Demand to Grow in 2014 and BeyondIn 2013, most lighting manufacturers had good to excellent financial results, and many are at least reasonably bullish about the prospects for 2014.

Supply Chain HQ talked to Robbie Paul, director of lighting sales at Digi-Key Corp., about the business of lighting in general—and LEDs in particular—and got his thoughts on where the industry may be headed.

Paul looks ahead to 2014 and beyond and finds markets and customer segments in which he believes LED sales have barely scratched the surface—both in the United States as well as in Mexico and China.

Supply Chain HQ: What do you see in 2014 in terms of overall customer demand for LEDs?

Robbie Paul: In 2013, we had very robust demand. I see that demand just continuing to grow in 2014 because the manufacturing processes are continuing to improve on the LED side. The prices are coming down even faster than I had expected. We’ve had about 15% to 20% price erosion, which has been enabling so many more applications.

Light bulbs are a prime example. I think they are selling a lot more [LED] light bulbs than those manufacturers ever thought they would sell through Home Depot and other retail outlets. I just see the demand for LEDs continuing to increase exponentially through 2014.

Robbie Paul
“I would say that [residential] demand is going to continue to increase dramatically through 2020,” says Robbie Paul, director, lighting sales, Digi-Key Corp.
Supply Chain HQ: There is still a huge, but slow to adopt, market for LED lighting in the residential sector.

Robbie Paul: If you’re talking about the residential segment, just in the United States there are six billion available sockets for light bulbs. And if you look at the penetration of LED into those six billion, it is [still] in the single digits. The vast majority of people don’t have LED, or few are experimenting with it.

I would say that demand is going to continue to increase dramatically through 2020 simply because of the available market. Six billion is a lot of sockets to fill.…But the next big segment is yet to come—office space with fluorescent lighting. LEDs have not really replaced fluorescent lighting all that much.…So, the payback is still two to three years [away].

Supply Chain HQ: I’m a little surprised to hear that the office space customer segment has been a bit slow to catch on to LEDs.

Robbie Paul: That’s because the fluorescent technology is very efficient. [But] it’s just not great light. In other words, you can’t control fluorescent that well….You can’t take advantage of any kind of energy harvesting with fluorescent technology. It’s a little more difficult and complicated.

LEDs are very controllable. So concurrent with the growth of LEDs, we’re seeing dramatic growth in controls. Dimming, turning these LEDs off with timers, daylight harvesting…taking advantage of any sunlight that comes through the windows and dimming those lights that are closest to the windows. That is all coming. In the next three to five years, you will see the office space transitioning to LEDs.

Supply Chain HQ: Is there almost a “generation gap” in terms of who is more enthusiastic about going after LED lighting?

Robbie Paul: Oh, absolutely. I think the early adopters are always those people who don’t necessarily look at how much something costs but [look at] the green technology….And the people who look at those aspects end up being the younger generation because I don’t think 70 or 80 year olds can wrap their heads around a $15 bulb. The math doesn’t work, no matter how you justify it. You tell a 70-year-old person, “Hey, this bulb is going to last you 40 years.” They will laugh and say, “Hey, wait a second. I am not going to live 40 years! I don’t need a bulb for 40 years.”

The generational gap, the industry you work in – all that contributes to that kind of decision. In general, I think people today are more receptive to technology.

Supply Chain HQ: As construction continues to pick up, do you see more and more of those new buildings emphasizing LED lighting to their tenants?

Robbie Paul: Oh, yes. Absolutely. Especially leading states like California, where you absolutely have to use [LEDs]. You have to have dimmers and controls incorporated, as well. Another thing that is driving sales are the rebates—federal rebates, state rebates, municipal rebates and utility rebates are what’s going to drive this, too. And on the commercial level, that is critical. That is why all the manufacturers want Energy Star rating and things like that—so they can position their products for rebates—which make the ROI much more attractive.

But you look at other places like Mexico and South America, and they actually have a faster adoption rate….In fact, some of our fastest-growing customers are in Mexico, more so than in the United States. That is mostly street lighting….Same thing in China. They’ve got a big initiative to replace all their streetlights. Millions and millions of streetlights, which translate to billions of LEDs.

That is why I say this is just the tip of the iceberg with the demand. Peak demand isn’t coming until, I think, 2020….There is so much to convert, and the penetration is so low.

Joe Nowlan

Joe Nowlan is a freelance writer-editor who covers the lighting and electrical distribution industry as well as other supply chain-related topics.

Joe was an associate editor for Industrial Distribution magazine, where he wrote about the unique relationships between manufacturers and distributors and their related industries. More recently, he has been a contributing writer for The Electrical Distributor.

Joe is also the author of two mystery novels: “Media Blitz” and the just-published “The Zyratron Affair.”

He is a graduate of Boston College.